Dow Chemical revised to BUY
The overall result is that the Z-scores show DOW to be rather more healthy than I had previously posted, with a Z-score at a healthy 3. With this reassurance that DOW is healthy and previous analysis showing good discount rate and cash flow I am changing my call to a BUY and I will be buying some stock in this company shortly. For a feel of what a Z-score of 3 means here is a plot over time of what S&P rating different Z-scores have been equivalent to:
Plot of how rating agency ratings (data and fit lines) have followed Z-scores over time. Typically the agency ratings track this plot on a lag of about 3-years (that is to say that the Z-score is a predictor of the agency ratings). At this time Dow Chemical has a rating above 3, which is quite safe.
Thanks go out to all the readers who suggested paths to re-evaluate, even those that did not pan out. The entire goal of this site is to encourage critical review and arrive at the right answer.